Officials: U.S. unlikely to take over banks

UPDATED:

Some big banks will need more bailout bucks, Obama administration officials said Sunday, although it is unlikely the government might need to take over any reeling institution.

“We’re confident that, yes, some are going to have very serious problems, but we feel that the tools are available to address these problems,” senior presidential adviser David Axelrod said.

Regulators now are putting the nation’s 19 largest banks through tests to determine their ability to withstand worsening economic conditions. The government hopes to make the results public in early May.

President Obama, speaking at a news conference at the Summit of the Americas in Trinidad, declined to speculate in any detail on what the tests might show.

“I think what you’ll see is that, not surprisingly, different banks are in different situations. They are going to need different levels of assistance from taxpayers,” Mr. Obama said. “We’ll have more information as these stress test numbers are provided. I haven’t seen all of them yet.”

White House Chief of Staff Rahm Emanuel cited first-quarter reports from major banks showing they are making money as an encouraging sign. “But that doesn’t take away that some are going to need resources. We believe we have those resources available in the government as the final backstop to make sure that the 19 are financially viable and effective,” he said.

That does not mean going back to Congress for more money now, he added. Mr. Emanuel did not say he had seen the tests, but said, “I do believe we have the resources to handle what the results will be.”

The tests subject banks’ balance sheets to scenarios that include rising job losses and declining home prices. The results will help officials divide banks into three categories: banks that need more capital, either from the government or private investors; those that are healthy; and those that are too weak to survive.

Asked on ABC’s “This Week,” whether the Obama administration will avoid any kind of temporary nationalization of banks, Mr. Emanuel responded: “I think we will be able to avoid that… . I believe we will not have to deal with nationalization, and that’s not the goal, nor do we think that’s the right policy objectives here.”

Mr. Axelrod pledged that the public would see the test results.

“I believe that the American people and the markets can handle the truth,” he said on CBS’ “Face the Nation.”

“It’s important that there is disclosure. And I think the banks are going to want that because they’re going to want the markets and the country and the world to know exactly what their condition is,” he added.